HREMIC Issuance 2017 Full Year: Volume Tails Off

HREMIC issuance for 2017 was $9.24 billion, 6% behind 2016’s total of $9.86 billion, but still the third highest issuance year after 2016 and 2015. Fourth quarter volume was $1.93 billion, up 3% from 2017’s third quarter issuance of $1.87 billion.

There were 25 transactions underwritten by three sponsors, Nomura, Citigroup, and Bank of America Merrill Lynch. Nomura remains the #1 issuer for the full year with $4.2 billion. Citigroup was second with $3.2 billion, and Bank America Merrill Lynch was third with $1.8 billion. Life-to-date BAML has issued $19.6 billion of all HREMICs for a 36.7% market share, and Nomura has issued $14.4 billion for a 26.9% market share.

HREMIC volume in the second half of 2017 was off 30% from the first two quarters, suggesting investors are more comfortable owning HMBS outright than as structured securities. An increase in HECM prepayments disproportionately affects Interest-Only securities, which may help explain the volume drop.

HREMIC collateral consists of HMBS, which are Ginnie Mae guaranteed pass-through securities. HMBS are backed by pools of participations of HECMs, which are FHA-insured reverse mortgages. This double layer of government guarantee, combined with the relatively high coupon and favorable prepayment patterns of the underlying loans, results in very favorable execution, even when compared to other Ginnie Mae “forward mortgage” securities.

New View Advisors compiled these rankings from publicly available Ginnie Mae data.

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